Interview with Jon Faine, 774 ABC Melbourne

Joe Hockey joins me this morning, the Federal Treasurer. As the Government seems indeed to be voting no confidence in itself, Mr Hockey good morning to you.

TREASURER:

Good morning Jon.

JON FAINE:

The instability, the headlines, the constant swirling rumours – that is a vote of no confidence in the Abbott Government from its own ranks, is it not?

TREASURER:

No. No it’s not true, and it’s just commentary and gossip. We’re getting on with the job – the unemployment rate fell from 6.4 to 6.1 in Victoria last month. 93,000 new jobs created since the election in Victoria. So, we’re getting on with the job, Jon.

JON FAINE:

I understand that comes from the briefing sheets but nobody’s believing you Joe Hockey including your own backbench.

TREASURER:

No, no, no, hang on, that’s not the briefing sheets, that’s actually data from the Australian Bureau of Statistics…

JON FAINE:

In your briefing sheets, but it’s not working [inaudible]…

TREASURER:

Well no, no, hang on it’s not briefing sheets, Jon. It’s what the data is. You know, you look at it and say isn’t it great that 62,000 new dwellings have started construction in Victoria in the last 12 months. This is jobs, 250,000 people working in construction…

JON FAINE:

Do you walk the plank to save Tony Abbott’s neck?

TREASURER:

I’m not going to get involved in commentary and gossip, I mean Canberra is…

JON FAINE:

You are involved in it whether you like it or not, you are involved in it.

TREASURER:

No I’m not, no I’m not, no I’m not. Because I’m focused on doing my job, everyone is focused on doing their job. There is a lot of gossip, a lot of rumours, and you just can’t respond to that because the Australian people expect us to get on with doing the things that make their lives better.

JON FAINE:

It’s designed to sabotage Canning all of this isn’t it? The headlines, the briefing, the behind-the-scenes meetings – designed to sabotage Canning. It increases the swing against Tony Abbott which triggers more panic amongst the backbench who are nervous about their own jobs, protecting the swing to their own seats and that makes a challenge almost inevitable, does it not?

TREASURER:

Well, Jon, again I say it is hugely important that we focus on doing what the Australian people expect. In my case that is rolling out the tax reform that is going to build a stronger economy, fixing the Budget, building the infrastructure. I’m in discussions with the Victorian Government about how to get on with the job of filling the infrastructure vacuum associated with the abolition of the East West Tunnel…

JON FAINE:

You’ve been talking about that now for what, nearly a year it must be…

TREASURER:

Well I’m waiting. I’m waiting on the Victorian Government to give us the proposal. We’re still waiting for the details of the Western Link of East West which is meant to be coming to us. They’re sitting on $1.5 billion of Commonwealth money that was appropriated for the East West Link. We’re still committed to that project – I know you don’t like it, I know you don’t like it…

JON FAINE:

Are you still refusing to put money into public transport in Melbourne?

TREASURER:

No, well we are prepared to put it into public transport because of the sale of the Port of Melbourne, which I support the Victorian Government on. I want them to get on with the sale of the Port of Melbourne. If they take those proceeds and put them into public transport in the middle of Melbourne, we will be supportive of that and we will give them a 15 per cent bonus. A 15 per cent bonus, so yes, our money will go into public transport in the middle of Melbourne…

JON FAINE:

Except everybody is sitting around talking about leadership, talking about by-elections, talking about leadership speculation…

TREASURER:

No, no, no…

JON FAINE:

…And no one is concentrating on the things that you’re wishing you could concentrate on.

Well every newspaper in the country has it on their front page virtually.

TREASURER:

Well, you know, this is what happens in the modern world. I mean I’ve been in politics nearly two decades now and it seems that in the modern world there’s this sort of stuff but the main thing is the Australian people see through it and they want results. Good news – the value of merchandise exports from Victoria increased nearly five per cent in the last 12 months, that’s great, lower Aussie dollar…

JON FAINE:

Joe Hockey even The Australian which is your loudest cheer squad…

TREASURER:

[laughs] not mine…

JON FAINE:

PM urged to stare down plotters, Ministers say challenge to Abbott “inevitable” as Turnbull’s support grows.

TREASURER:

Jon again, I just talk about the things that matter to everyday Australians and the lower Australian dollar is helping manufacturing in Victoria, which is very, very important. It’s a huge employer as you know and Victoria has had a pretty tough time with what’s happened to the car industry and other industries, but you’re starting to see employment pick up and obviously the Free Trade Agreement with China is going to be hugely significant for Victoria, very positive for Victoria, and we’re trying to get that through Parliament.

JON FAINE:

Well let’s turn to the economy…

TREASURER:

Hooray!

JON FAINE:

You’ve put all your eggs into the mining basket and your Budget predictions from your previous Budgets have been blown to smithereens. In fact your economic credentials are glaringly exposed for everyone to see how inaccurate they are.

TREASURER:

Wrong. Dead wrong on a number of fronts.

JON FAINE:

Well, on which bit?

TREASURER:

Well the starting point is…

JON FAINE:

Growth is stalling, recession is looming…

TREASURER:

Hang on, hang on…

JON FAINE:

…the surplus is vanishing into the distant future if indeed it ever arrives at all.

TREASURER:

Well, that’s all wrong. I’ll just say to you a number of points. Firstly, you said we put all our eggs in the mining basket. The mining industry represents around ten per cent of our economy, 55 per cent of our exports, and in fact in volume terms last month we had record iron ore go through Port Hedland. But the big area of growth and opportunity in Australia into the future is services. That is healthcare, tourism, education, financial services – which is 70 per cent of the economy, 80 per cent of jobs, but just 17 per cent of exports. Now as the Chinese economy moves from an investment phase into a consumption phase – we’ve got good data that indicates that is happening in China at the moment…

JON FAINE:

As their growth stalls.

TREASURER:

Well no, it’s not stalling, that’s not right. They’re still forecasting seven per cent, even if you don’t believe their seven per cent growth…

JON FAINE:

And I don’t.

TREASURER:

Their contribution to global output at the moment is the same as it was just four or five years ago, and the Reserve Bank said that just the other day – they represent 30 per cent of global growth this year. So the Chinese consumption story, where they will want our education services, our health services, aged care services and a range of others. We’re able to export our expertise in those things to China and importantly, at the same time, get rid of some of the taxes they’re imposing on our goods under the Free Trade Agreement. Like taxes on our wine industry, on our beef, on our dairy, on a range of other things including financial services as well.

JON FAINE:

This is an import and export agreement principally though isn’t it Joe Hockey. This is an agreement about China having access to more of Australia as a market and in exchange we get to export some services.

TREASURER:

Well, the fundamental point is we have a $150 billion a year trade relationship with China. They’re by far our biggest trading partner. We export $100 billion to them…

JON FAINE:

Mostly minerals.

TREASURER:

Well no, it’s around about half, just over half is minerals – or iron ore in particular…

JON FAINE:

And coal.

TREASURER:

Coal’s come down a bit; coal’s come down a bit in volumes. Because they’re actually protecting their local coal industry, they put a tax on our coal – under our Free Trade Agreement they’re abolishing the tax on our coal…

JON FAINE:

And they want greater access to Australia as both a labour market and also an export market.

TREASURER:

Well not particularly – no, not as a labour market actually. They want to build a relationship with Australia because we are a strong, reliable source of goods and services for them. Look, we are a small player in their lives. As I was just about to say, the relationship with China benefits us by two dollars to every one dollar we spend. So we import $50 billion from them each year, we export $100 billion to them each year. So, any dollar we can improve the relationship with, we win 2-1 as a nation, we’re richer 2-1. We’re just 23, 24 million people, that’s the size of a city…

JON FAINE:

Oh yeah, there are cities in China that are as big as the Australian population, we do understand that Joe Hockey.

TREASURER:

But that’s very important Jon, because you know we shouldn’t pretend that we are crucial for China, and if this Free Trade Agreement doesn’t get through – where they lift the taxes on our exports to them, they get rid of a whole range of taxes on our exports. If that doesn’t get through, we won’t be able to get back there for ten years, they’ll just move on to all the other pressures they’ve got in the economy…

JON FAINE:

And there are plenty of people who say if that secures Australian jobs for Australian workers, that’s a price worth paying.

TREASURER:

Yeah, well it is going to do that, it is doing that, there’s no doubt about that. I mean free trade – we are an exporting nation. We produce much more than we consume as a nation and therefore we are the big beneficiaries of free trade. New Zealand, I’ll give you an example…

JON FAINE:

Some people are, some people are saying well I won’t, I’ll be the loser and if you work in the car industry for instance and you see the Australian dollar back at the levels where the Australian car manufacturing companies were totally sustainable, you despair at the tens of thousands of jobs that are going out the door there.

TREASURER:

Well…

JON FAINE:

And you blame Joe Hockey.

TREASURER:

Well, I’m sure they’ll blame me, but…

JON FAINE:

No but you stood there in the Parliament and you wagged your finger at them and dared them to leave and they did when the dollar was up above parity. Now it’s back where it’s totally sustainable on your watch Joe Hockey. In no time at all it’s back at the levels where those jobs did not need to go.

TREASURER:

Well, Jon, if they were going to make profits in Australia, if they were making profits in Australia…

JON FAINE:

And they were.

TREASURER:

They weren’t. Let’s be fair dinkum about it, they weren’t. The cheque from Australian taxpayers was going straight to Seattle and that was reflected in their accounts, so…

JON FAINE:

Well their profits go straight to Seattle too, so what’s the point of that?

TREASURER:

There was no profit, there was no profit…

JON FAINE:

The jobs were staying here, thousands and thousands of them.

TREASURER:

Well, I’m sorry that’s wrong…

JON FAINE:

Which bit? Which bit of what I just said is wrong? The jobs were here, tens of thousands of them and most of them in Victoria.

TREASURER:

A number of car manufacturers had decided to leave before we even came to Government, and you know that…

JON FAINE:

Years ago. Chrysler in Adelaide years ago. The industry was totally sustainable - Ford, Holden and Toyota. They had factories, including Toyota’s state-of-the-art factory which is now going to be mothballed for no reason whatsoever.

TREASURER:

Well, it is sad that that has happened…

JON FAINE:

It’s negligent.

TREASURER:

But Jon, the fundamental point is we have to empower Victorian businesses to go out there and have a go. That’s why in the Budget, 512,000 Victorian small businesses got a tax cut. We’ve seen the unemployment rate drop from 6.4 to 6.1 in Victoria in the last month. Since my last Budget in May, 60,000 new jobs have been created in Australia. In the three months after Wayne Swan’s last Budget, 500 jobs.

JON FAINE:

Do you concede that the car industry would be sustainable again now if you hadn’t killed it?

TREASURER:

No, the car industry they made a decision. The executives in the car industry made decisions years ago about the future of the car industry…

JON FAINE:

Not years ago, no, because you dared them to go. You said, you personally said to them and in the Parliament you taunted them, Joe Hockey.

TREASURER:

No I didn’t, I’m sorry Jon again I don’t accept the premise of your question. The fundamental point is we want the whole economy to grow, and there will be businesses that from time to time close. But the good news is that bankruptcies and business failures are at the lowest level now for years and years. What we’re starting to see is opportunity come and we don’t want to miss the opportunity. The opportunity is in a range of different areas. For example, telecommunications exports from Victoria, telecommunications, computer, information services – they’ve more than doubled over the last decade, and we see great opportunity in the future as a result of opening the door. We’ve kicked open the doors in Japan, Korea and now China with these trade agreements, to give our community better opportunities and jobs in the future. That’s paying a dividend; it’s paying a dividend in real jobs.

JON FAINE:

Okay, my time is not unlimited so let’s move to the report released overnight from Deloitte saying that a 15 per cent GST would allow you to cut the company tax rate to 25 per cent, are you tempted?

TREASURER:

Well, we have a tax reform process underway. It is a high quality submission, there’s no doubt about that. When someone goes to the effort of doing some economic modelling and costing, it helps the process and helps to better inform debate. We’ve received 850 submissions. I’ve discussed it with the Victorian Government, all state governments, and we’re continuing to work our way through.

JON FAINE:

You haven’t told me anything…

TREASURER:

No [laughter].

JON FAINE:

Are you tempted?

TREASURER:

Am I tempted to tell you anything? [Laughter]. Not on this at the moment, but I’d say to you – look it is really important we have tax reform. It is hugely important we prepare the economy, it’s a new economy…

JON FAINE:

But what sort of tax reform? You disappointed the conference of accountants when you stood up and…

TREASURER:

No I didn’t, no I didn’t…

JON FAINE:

Well they said they were disappointed because there was no detail in what you had to say. The nation is ready for some detail, why don’t you tell us which way you’d like to jump.

TREASURER:

Well firstly, the one accounting firm, representative body that didn’t want to participate and spat the dummy was the one that was disappointed, but everyone else was pretty happy with it. Secondly, in relation to tax, I’ll give you an example. This week I am introducing into Parliament world leading legislation that is going to crack down on multinationals not paying their fair share of tax. In Turkey last weekend, not this recent weekend but the weekend before, I flagged to the G20 we were moving on this. We, together with the United Kingdom, are leading the world in cracking down on multinationals that are not paying their fair share of tax.

JON FAINE:

How much will that gather and generate for the Australian Government in income?

TREASURER:

The reason why I’m not putting a specific numbers is, just to be clear – we embedded people, tax office people, in the 30 companies that we thought were not paying their fair share of tax, learnt something about their business models, and under our legislation we will make an assumption about what their profits are. They will contest that. I’m not going to do what the previous government did and put a number on the mining tax – they put a number on the mining tax and the mining tax never raised a dollar. This I’d rather under promise and over deliver and on the multinationals I can assure you there will be a dividend for Australian taxpayers as a result of what we’re doing. But to put a specific number on it…

JON FAINE:

So you’ll pass tough laws but you won’t actually guarantee that they’ll raise a zac.

TREASURER:

Well they will, they will raise money but Jon, I’m not going to make the mistake that the previous government made, where firstly, you flag to those companies, because it’s only 30 companies, you flag to them how much you’re going to try and get out of them…

JON FAINE:

Well they all know who they are.

TREASURER:

Well that’s right, and then they change their behaviour. Then they change their behaviour…

JON FAINE:

Well if they change their behaviour to comply, that’s a good thing.

TREASURER:

Well, correct. That’s what I’m endeavouring to do.

JON FAINE:

Carry a big stick.

TREASURER:

I’m carrying a big stick and on this occasion I’m not speaking too softly.

JON FAINE:

Separately, Michael West in the Fairfax newspapers, The Age and the Sydney Morning Herald, has been explaining to us exactly how porous Australia’s money laundering laws are. In particular with the Chief Minister of Sarawak, Taib Mahmud and his family’s extraordinary investments. Not just in this country but 400 companies in 25 countries and a vast fortune built on apparently very little income as the Chief Minister of Sarawak. And significant investments here in Australia, have you been following the story and are you concerned?

TREASURER:

I haven’t been following the story but in relation to money laundering – I have introduced last week, in the last few weeks, some very tough legislation in relation to foreign investment as you’d know. We’ve been working with the Australian Federal Police on money laundering issues. The fundamental point is you need other countries to notify the Australian Federal Police that a crime has been committed and then that the proceeds of crime are coming into Australia. So, at the moment, globally, it is very difficult to identify money laundering, other than through the payment system where there are extraordinary amounts of money…

JON FAINE:

Okay, if it was a drug dealer who had 400 companies in 25 countries and no apparent explanation for their extraordinary wealth, you would seize their assets and have some reverse presumptions in order to justify the changes. Here it’s white collar crime being alleged. The Chief Minister of Sarawak who earns a couple of hundred thousand dollars a year has a fortune of billions of dollars squirrelled away in assets all around the world and everyone goes tut tut not much we can do about it.

TREASURER:

Well, before you can actually proceed you need to be sure that it’s not inherited wealth, or it’s not gifted wealth, whatever that might mean, or you know…

JON FAINE:

No it’s plundered, it’s plundered from the people of one of the poorest places on earth.

TREASURER:

And should that be true and I’m very aware of the defamation laws, so I don’t want to go down that path. But should that be true, if that is true, it is a grievous form of heinous corruption. Corruption is a cancer in community and you know if there’s any evidence of corruption and any evidence of money laundering into Australia as a result of corruption, I would expect the Federal Police to get onto it immediately.

JON FAINE:

Just finally, with your family’s personal experience of asylum seeking, refugees and finding a new life in a new country, do you think Australia is doing enough? Even with the 12,000 in trying to resettle people from the Middle East?

TREASURER:

Well, Jon, it is a significant announcement. You’re right, I’m the son of a refugee from the Middle East into Australia many years ago. We are a great country, a great, great country. And you know this is one of many reasons why 12,000 is a significant number – because we’re going beyond the refugee camps and going into places where people have been seeking refuge. As I said I was in Turkey two weeks ago, I had a very lengthy conversation with the Prime Minister of Turkey about what’s happening there. They’ve got 2.1 million refugees in their country at the moment. His view, and the view of a number of others, is there needs to be a separate state created in Syria. That would become a refuge for people to go back – but that’s very, very complicated, I mean Syria is a mess.

JON FAINE:

There’s no doubt about that.

TREASURER:

To repatriate people wherever they may be, and I see Germany has just closed its borders, you actually need to have a safe haven for them. The fundamental point is that while Assad is letting off chemical weapons against his own people, you’re never going to have a safe haven. So, it is unbelievably complex. Australia is exceeding the rest of the world in its generosity given how far away we are and given our population, but we are a great nation and it’s one of the reasons why we are.

JON FAINE:

I have gone way over time but thank you indeed for indulging me this morning and thank you for your comments on all those issues. Joe Hockey, the Federal Treasurer, speaking to us from the national capital.